September 26, 2008

Russia, Venezuela to Set Up Joint Energy Consortium

Text of report by corporate-owned Russian news agency Interfax

Orenburg, 26 September: A memorandum on mutual understanding signed by the Russian and Venezuelan energy ministries in Orenburg today provides for the creation of a Russian-Venezuelan consortium.

"We signed a memorandum between the Russian Energy Ministry and the Venezuelan Energy and Oil Ministry which says that we are planning to draw up a special intergovernmental agreement in the near future that would regulate our relations in the oil and gas industries," Russian Energy Minister Sergey Shmatko told journalists.

He said that an intergovernmental agreement draft will provide for the creation of a joint Russian-Venezuelan consortium which will include Venezuela's national oil company PDVSA and five major Russian companies - Gazprom, Rosneft, TNK-BP, Surgutneftegas and Lukoil.

"We have set a rather tight deadline for ourselves for drawing up an intergovernmental agreement draft. The draft should be ready by the end of October," Shmatko said. He said that before the end of October the Russian-Venezuelan intergovernmental commission will hold a meeting, after which the draft will be submitted to the governments of the two countries for consideration.

Asked how the stakes in the consortium would be distributed, Shmatko said a Russian consortium would be set up first, which will create a Russian-Venezuelan consortium together with PDVSA. At the moment, it is understood that the Russian companies will have equal shares in the Russian consortium. However, no final decision has been made yet, he said.

"I think the companies will have equal shares, but they must reach an agreement among themselves. As for the terms of cooperation between the (Russian) consortium and PDVSA, Venezuela doesn't have tight national restrictions. I think it's unlikely that we'll have a controlling interest," he said. "PDVSA will have control," he said. "The creation of such a consortium is, of course, a very serious bid to form a major player," he said.

Asked when the creation of the consortium will be completed, he said: "I think that formally the questions relating to the foundation could be resolved by spring next year at latest". Speaking about Russian investment in Venezuela as part of the consortium, Shmatko said this is a question of "tens of billions of dollars".

For his part, Gazprom CEO Aleksey Miller said documents on the creation of the national oil consortium are being drawn up.

Asked how the stakes and control will be distributed in the consortium, Miller said: "It seems the Russian national oil consortium will be headed by Gazprom. We are ready for this because the company has been working in Venezuela for several years and has gained positive experience. I can say that Gazprom has drawn up for Venezuela a general plan for the development of its gas industry, therefore we are working in this country on a scientific basis."

Asked whether Gazprom will have control over the Russian- Venezuelan consortium, Miller said: "No, Gazprom will be the operator."

As for investment, Miller said that this is a matter of "hundreds of millions and billions of dollars". "Of course, we need to make a final decision on fields we will be working with," he said.

Miller said the Russian-Venezuelan consortium will have its headquarters in Caracas.

He said the memorandum on understanding with Venezuela's PDVSA will allow Gazprom to work in new areas and expand cooperation in the oil and gas industry with Venezuela and other countries, including Bolivia.

"At present, we and our Venezuelan colleagues are considering the possibility to work in third countries, in Bolivia for instance. The memorandum was signed by Gazprom and Venezuela's PDVSA today to allow us to have permanently working mechanisms so that we could carry out all these projects, find new areas of cooperation and prioritize our projects," Miller said.

[Russia and Venezuela have agreed on regions in Venezuela in which the future joint consortium will operate, Interfax reported at 1209 gmt.

Russian companies will work in the Carabobo, Shmatko said after talks between Medvedev and Hugo Chavez.

"We agreed with the Venezuelan company and with our partners on naming oil provinces and fields for the consortium to work on," he said.

"These are practically all fields along the Orinoco River," Shmatko said, adding that Russian companies have already started operating in Ayacucho and Junin.]

Originally published by Interfax news agency, Moscow, in Russian 1115 26 Sep 08.

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